CBI Market channels and segments: Wine in the United Kingdom
Wine trade in the United Kingdom (UK) is dominated by supermarkets, which increasingly sell private labels and import bulk wine from developing countries to save costs. Reaching this channel can best be done through an importer, mitigating your risks of dealing directly with supermarkets. At the same time, opportunities can increasingly be found for low-volume suppliers, at the emerging independent specialists.
The trade channels for wine in the UK are presented in Figure 1. A further explanation of the channels can be found under Annex 1.
Figure 1: Trade channels for wine in the UK.
Buyer concentration makes long-term relationship important
The UK market has a small number of large wine buyers. The off-trade (around 10 supermarket chains and speciality shops) dominates wine sales. Supermarkets have become very competitive in the field of wine in order to attract more consumers. Some of them focus on the premium segment, such as Waitrose, while others focus on low-priced bulk wines. All of them run frequent promotions which bring down the prices of wines. The big players have also established their own private labels, which have grown in popularity and are regarded as labels of quality. This dominant position of supermarkets is expected to strengthen further in the coming years.
– Be consistent and trustworthy in your supply quality and quantity. Make sure your wine is always available; once buyers need to go elsewhere they do not come back.
– Engage in a long-term partnership with a UK importer or bottler, where you develop a buyer’s own brand, in order to split risks and profit more equally.
Independents offer opportunities for small-volume suppliers
Independent wine merchants, as opposed to larger specialist retail chains, are emerging in the UK wine market. They can differentiate themselves more, thereby addressing the consumers’ growing interest in wine. They are finding new customer bases, are building a more attractive assortment compared to supermarkets and have an innovative marketing and client approach. For example, they organise in-store wine tastings and winemaker events. The number of independent retailers in the UK has increased by 50% since 2007 to approximately 750 stores, excluding large retail chains (Decanter 2014). Specialist retail chains, as opposed to independents, are actually losing market share. The near bankruptcy of retail chain Oddbins is illustrative of this development. Their shops decreased in number from 278 in the late 1980s to 37 in 2012.
- Develop a unique selling point, like unusual origins, varieties, production/region stories, sustainability/organic or Fair trade certification.
- Branding is very important in the premium segment in the UK.
- Independent wine merchants can best be reached through an importer specialized in the off-trade.
Economic recovery: switching back to on-trade consumption
The economic crisis led to a significant decline in wine consumption in the UK, and a switch to the off-trade segment. Consuming wine at home saves costs. As the economy and consumer purchasing power grows again, the on-trade sector is recovering. Sales in restaurants, hotels and bars will increase. Exporters in developing countries can respond to this trend by focusing their distribution strategy on importers specialized in supplying on-trade channels.
In times of economic adversity, more opportunities can be found in the off-trade sector. In contrast, in times of economic prosperity, opportunities in the on-trade increase.
Online sales in the off-trade account for 11% of the market in the UK, ahead of the average for European countries (The Drinks Business 2015). In general, retailers with physical stores lead the development of online sales. Consumers need to know the retailer before they will rely on the information provided in the webshop. Nonetheless, many small premium wine importers without physical stores offer their wines through a webshop too. Premium wines sell well online as consumers are willing to pay more for a less common wine which they cannot buy at the supermarket. Read more on online sales in the CBI Product Factsheet: Online sales of wine in Europe.
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